Cross-sectional return seasonalities and intra-industry overreaction to earnings seasonalities

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.advisor Nyberg, Peter
dc.contributor.author Weckman, Markus
dc.date.accessioned 2018-06-29T10:10:52Z
dc.date.available 2018-06-29T10:10:52Z
dc.date.issued 2018
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/32539
dc.description.abstract Recent asset pricing literature describes prevalent and recurring return seasonalities in both the time series and cross section of stock returns. Most interestingly for this study, Keloharju, Linnainmaa, and Nyberg (2016) document cross-sectional return seasonalities e.g. in individual stocks, well-diversified portfolios, and various anomalies. Furthermore, Chang et al. (2017) document abnormal returns to earnings seasonalities and find evidence for investors failing to properly price information contained in the seasonal patterns of earnings. This study is the first attempt to combine these seasonality effects and explain at least a part of the prevalent and persistent occurrence of cross-sectional return seasonalities – even after controlling for firms’ own earnings announcements – by the joint effect of abnormal returns to earnings seasonalities and investor overreaction to intra-industry information. The methodology used to achieve the objective of this study consist of three main sets of methods: Firstly, to calculate cross-sectional return seasonalities, I follow the methodology presented by Keloharju, Linnainmaa, and Nyberg (2016). Secondly, to calculate abnormal returns to earnings seasonalities, I follow the methodology presented by Chang et al. (2017). Finally, to calculate overreaction to intra-industry earnings announcements, I base by methodology to that of Thomas and Zhang (2008). Quarterly earnings data used in the analyses come from Compustat Fundamentals Quarterly file. Monthly and daily stock return data come from Center for Research in Securities Prices (CRSP). Despite the strong theoretical foundation as well as promising baseline results, the main results of this study are inconclusive: I find that cross-sectional return seasonalities in industry portfolios are lower in magnitude when the effect of intra-industry overreaction to earnings seasonalities is taken into account. Even though this effect is limited, I find certain indications for the importance of intra-industry overreaction in explaining seasonalities in the cross section of stock returns. This study contributes to the existing literature in two main ways: It structures the theoretical reasoning behind this potential explanation for cross-sectional return seasonalities. Furthermore, it presents the basic methodology for further testing this potential explanation in the future utilizing even enhanced methods. en
dc.format.extent 55
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Cross-sectional return seasonalities and intra-industry overreaction to earnings seasonalities en
dc.title Kausivaihtelu osaketuottojen poikkileikkauksessa ja toimialojen sisäinen ylireagointi tulosten kausivaihteluun fi
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.subject.keyword cross-sectional en
dc.subject.keyword seasonalities en
dc.subject.keyword overreaction en
dc.subject.keyword abnormal en
dc.subject.keyword returns en
dc.identifier.urn URN:NBN:fi:aalto-201806293949
dc.type.ontasot Master's thesis en
dc.type.ontasot Maisterin opinnäyte fi
dc.programme Finance en
dc.subject.helecon rahoitus fi
dc.subject.helecon osakemarkkinat fi
dc.subject.helecon hinnoittelu fi
dc.subject.helecon tuotto fi
dc.subject.helecon tulos fi
dc.subject.helecon muutos fi
dc.subject.helecon reaktio fi
dc.subject.helecon sijoittajat fi
dc.ethesisid 17232
dc.location P1 I fi


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